From headline to breadline

‘From Headline to Breadline’ is a studentship project in association with the Nottingham Civic Exchange that explores how the inflation rate can be misleading by examining its impact on different demographics.

We are advocating for a shift in policy from a focus on the headline inflation rate to what we call the 'breadline inflation rate': a more nuanced understanding of how those with low-incomes are affected by price increase.

We believe the breadline inflation rate is a progressive means to improve economic security and social equality and opportunity.

The generic inflation rate affects wage and tax changes in order to maintain the same standard of living. This has a big assumption attached: that people buy the same goods and services, and that the price value of those goods and services changes at the same rate.

This, however, is not the case.

Without an accurate measure, the real wages of some demographics increase disproportionately slower than the cost of the goods and services they buy.

For example, although the price of bus travel has increased by 65% for everyone since 2008, lower income households spend more on these services as a share of total income. In terms of the inflation rate, these households cannot be compared to someone of a higher income whose spending habits do not mirror this.

The project aims to share why a breadline inflation rate is important as well as influencing the Bank of England to alter public policy. The research into the alternative 'breadline' measure - formally known as the HCI - is to understand the suitability of such a measure as well as compare it against the current 'headline' measure, CPIH.

Inflation, and how it is calculated, matters. Our analysis shows that the poorest 30% of the UK population spends more than they earn. How the Bank of England takes account for this is more important than ever.